Buying a home is a milestone event in most people’s lives, offering a sense of security and usually some financial breaks too! Homeowners have several tax breaks available in 2026 and beyond, so let’s take a look at how your home can impact your tax bill.
Itemized Deductions
For most taxpayers, the standard deduction is the simpler choice that makes the most financial sense–but homeowners may find that itemizing is worth it. To itemize your deductions, they need to exceed the standard deduction of $16,100 for single filers, $32,200 for married couples filing a joint return, or $24,150 for head of household. (These are all 2026 values subject to change in future tax years).
Mortgage Interest Deduction
If you’re itemizing your deductions, you can deduct up to $750,000 in mortgage interest for loans taken out after December 15, 2017. This deduction can be applied to your primary residence and one secondary property, like a vacation home. It does not apply to rental properties–those expenses would be deducted on your Schedule E.
To claim your mortgage interest, you’ll need Form 1098 from your lender–Box 1 lists the interest paid during the year.
PMI Deduction
Private mortgage insurance (PMI) applies to mortgages with less than a 20% down payment, and you’ll pay the PMI until you reach 20% equity. The OBBBA makes PMI permanently deductible for itemizing on your Schedule A, but there is an income phase-out. If you make over $100,000, your allowed deduction decreases by 10% for every $1,000 your adjusted gross income (AGI) exceeds the $100K threshold. Thus, an AGI over $109,000 would render this deduction nil.
For a quick example, the table below shows what the PMI deduction would be for someone with an AGI of $90K, $104K, and $110K
| PMI Paid | AGI | Adjustments | Deduction |
| $3,000 | $90,000 | N/A | $3,000 |
| $3,000 | $104,000 | 40% decrease | $1,800 |
| $3,000 | $110,000 | 100% decrease | 0 |
You may notice that $100,000 is not a very high limit, and that is because the threshold was approved by Congress in 2006 and has not been adjusted for inflation. If it were adjusted for inflation, the AGI limit would be around $165,000. You know, because it’s been twenty years.
Speaking of Congress… Congressional salaries were $165,200 per year in 2006 and are now $174,000–a number Speaker of the House Mike Johnson says “has not kept up with inflation.” Guess what else hasn’t kept up with inflation? THE MINIMUM FUCKING WAGE, MICHAEL.
Anyway. To deduct PMI on your Schedule A for itemized deductions, you will need Form 1098 again. This time, you’re looking for the mortgage insurance premiums paid, listed in Box 5.
Home Equity Loan Interest Deduction
For certain home improvements, interest paid on a home equity line of credit (HELOC) can be itemized as well. This interest can be deducted if the loan was used for substantial home improvements–such as building an addition, renovating bathrooms or kitchens, installing a new roof, or installing a new HVAC system.
If your total mortgage debt (including the HELOC) exceeds $750,000, you may only deduct a portion of this loan interest. Check with your tax professional before planning how to use your HELOC funds to make sure you’re eligible for this deduction.
State and Local Tax Deduction
The deduction for State and Local Taxes (SALT), including property tax, income tax, and sales tax, allows you to deduct up to $40,000 in taxes paid to your city and state for tax years 2025 – 2028. This is an especially helpful deduction in states that have high property tax rates.
Medical Deductions
Making medically necessary renovations or installations in your home may qualify as itemized medical expenses! IRS Publication 502 spells out the specifics on eligible medical expenses. If a permanent improvement increases your property value, your deduction will equal the cost of the improvement minus the value added (for example, if your project is $15,000 and it improves your home value by $10,000, you can deduct the $5,000 difference).
For installations and home improvements that do not affect the value of your home, you can claim the full cost for your deduction. Examples include:
- Entrance and exit ramps
- Widening doorways
- Modifying door hardware
- Installing railings and support bars
- Lowering kitchen cabinets
- Moving electrical outlets and fixtures
- Modifying stairways
- Modifying fire alarms, smoke detectors, and other alert systems
- Grading the ground for access to the home
It’s important to note that medical deductions must exceed 7.5% of your AGI to be claimed.
Maximize Your Deductions
Working with a tax professional will help you maximize your deductions, credits, and overall tax savings. Owning a home is a big step–make sure you protect your investment on the tax side too! Send us an inquiry by emailing info@treecitytax.com today.